Table of Contents
Peace of Mind
What is a trust protector? A trust protector adds a layer of security to your estate plan. You can grant a protector many different powers that will vary depending on your specific planning goals. For example, a Protector can be given the ability to remove and replace trustees, control investment and distribution decisions, veto the actions of a trustee, and much more. You and your attorney can clearly describe the intended purpose of each enumerated power in the trust documents to help ensure that your wishes are carried out as planned.
Having a trust protector also allows your irrevocable Trust to adapt to future changes in laws and regulations that may impact the Trust. This is particularly important for family trusts designed to last over multiple generations. A Protector can also be named to appoint successor trustees, a key element in revocable living trusts that will become irrevocable upon your death or at some point in the future. It allows the Trust to continue without interruption and avoids needing a court to step in to resolve conflicts.
Flexibility
Adding a trust protector to your estate plan is an excellent way to protect against the unexpected. Having this third party (who is not a trustee or related to any of the beneficiaries) with the power within the Trust instrument to “do the right thing” can avoid costly court proceedings if things go awry.
Typical powers that can be granted to the trust protector are resolving disputes between trustees or between beneficiaries, vetoing investment and distribution decisions, overseeing the actions of the trustee and removing or appointing successor trustees as needed, and merging multiple trusts for ease of administration. A seasoned estate planning attorney can provide specific guidance on the best powers to grant to a protector.
A trust protector can also modify trust terms to accommodate unforeseen circumstances or new laws and help accomplish beneficiary tax planning objectives. This flexibility is particularly important for irrevocable trusts, where it can be difficult to predict future needs and changes in the law. However, even revocable trusts can benefit from a trust protector’s added flexibility.
Efficiency
If given the right powers in the trust document, a trust protector can save the trustees and beneficiaries significant time and expense by avoiding asking a court to “fix” a trust that doesn’t comply with the grantor’s intentions or the law. The powers granted to a trust protector can include removing and replacing trustees, controlling investment and distribution decisions, and even vetoing a trustee’s actions.
When a trust protector is appointed, the long-term Trust can adapt and adjust for changes in family dynamics, tax laws, financial markets, and other factors that might impact the Trust’s performance. A good trust protector is experienced, available, and impartial, able to make sound judgments and ensure the Trust meets its intended goals.
A trust protector can also mediate disputes between trustees and beneficiaries, saving the families time, money, and the hostilities that might result from contentious legal proceedings. A protector can also amend the Trust to accomplish tax planning for beneficiaries or keep pace with changing laws, such as those related to public benefit eligibility rules for a beneficiary with special needs.
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Ease of Administration
Trust protectors can be granted powers that help facilitate the Trust’s administration. For instance, if the trustee is unavailable or has to step down, the trust protector can be empowered to name a successor. It can prevent the need to involve the court, allowing for management continuity and a smooth transition. The protector may also be given the power to amend specific provisions in the trust agreement. It allows for flexibility to address the ever-changing circumstances of beneficiaries and changes in tax laws.
Having this flexibility is especially important in revocable trusts that will become irrevocable upon death or at some point in the future. For example, if the trustee needs help changing public benefit eligibility rules or other governing law provisions, the trust protector can make changes to keep up.
A trusted protector can also provide checks and balances on investment decisions and other Trust asset-related matters. This is often helpful in reducing the risk of a trustee making bad judgments that can cost the Trust and its beneficiaries money.
Tax Savings
In some cases, a trust protector can help with tax savings for beneficiaries. This is typically done by changing the structure of a trust to take advantage of current laws or to avoid the negative consequences of new legislation. It can be a big benefit for beneficiaries who receive large amounts of income from a trust.
Another important benefit of a trust protector is the ability to monitor the performance of a trustee. This is important because it can prevent a family member from becoming a rogue trustee, looting the Trust for personal gain. This monitoring can include removing and replacing a trustee who needs to meet their responsibilities or take advantage of the Trust. A Trust Protector is an excellent way to ensure your Trust stays on track after your death. However, incorporating a trust protector into your estate plan requires careful consideration and expert guidance.
